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Equity Options - Coggle Diagram
Equity Options
What are options
Subgroup of derivatives
Derivatives are contracts, set between two or more parties, that derive their value from an underlying asset, group of assets, or benchmark. 
An option is a contract giving the buyer the right—but not the obligation—to buy (in the case of a call) or sell (in the case of a put) the underlying asset at a specific price on or before a certain date.
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A stock option contract typically represents 100 shares of the underlying stock, but options may be written on any sort of underlying asset from bonds to currencies to commodities.
Basic use scenarios
Long call (buy call)
Expectation that underlying stock will increase in value. Right to purchase 100 shares and specified strike price before expiration date.
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Short Call (sell call)
Bearish strategy of selling call options on the market that trader believes will not significantly increase in price (high probability, high risk trade)
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Long put (buy put)
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Low probability, high reward strategy
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If the underlying stays the same or goes up in value, long puts will lose money.
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Short Put (Sell put)
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Why they were created
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Options
As a compensation stock options offer large potential upside as well as the choice around when to exercise and realize the taxes, if there are any.
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more flexibility than stocks by enabling them to position themselves for upward or downward movements in the underlying, or even in the volatility of the stock.
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